February 22, 2024

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BlackRock and ARK are reviewing Bitcoin ETF plans under the SEC’s cash-only model

BlackRock and ARK are reviewing Bitcoin ETF plans under the SEC’s cash-only model

Top applicants for a U.S. Bitcoin (BTC) spot exchange-traded fund (ETF) are adjusting their filings to comply with a cash-out model required by securities regulators.

Investment manager BlackRock and Cathie Wood’s ARK Invest have updated their S-1 registration data for their spot Bitcoin ETF with the U.S. Securities and Exchange Commission (SEC).

The S-1 amendments, filed on December 18, relate to the cash creation and redemption model for the proposed spot Bitcoin ETFs, with BlackRock and ARK accepting a cash redemption system rather than redemption in kind, implying non-cash payments like Bitcoin.

ARK Registration Statement Hint Its ARK 21Shares Bitcoin ETF will only allow for cash creation and redemption. The document stated “possibility of in-kind creation and redemption of shares,” noting that the ETF may also allow accredited participants to create and redeem shares through in-kind transactions, subject to regulatory approval.

Blackrock later foot A similar update, emphasizing that in-kind transactions may take place but only subject to regulatory approval.

“These transactions will take place in exchange for cash,” BlackRock’s iShares Bitcoin Trust ETF S-1 amendment said, adding:

“Provided the Nasdaq Stock Exchange receives the necessary regulatory approval to allow the trust to create and redeem in-kind shares in exchange for Bitcoin, these transactions may also take place in exchange for Bitcoin.”

According to Bloomberg ETF analyst Eric Balchunas, ARK and its ETF partner 21Shares did not want to do cash creation, but rather came up with an innovative alternative way to do in-kind redemptions. “So, if they give in, that tells you the SEC isn’t going to budge, and the debate is over, which is probably a good thing if you’re looking for January approval,” the analyst said. books.

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The SEC’s “cash-only” requirement means authorized participants (AP) will only be able to acquire more ETF shares by bringing the appropriate amount of cash to the table, according to investor and advisor Vance Harwood.

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“Some funds allow ‘in-kind’ creations as well. For in-kind creations, the access point takes the ETF’s tracked assets and exchanges them for ETF shares. The SEC is clearly not keen on allowing this for spot Bitcoin ETFs, Harwood said advertiser. He added that the SEC’s position was “understandable”:

“This will show where the ETF gets its underlying bitcoin from – the ETF will buy it, most likely from reputable exchanges, whereas if you allow in-kind transfers, you won’t be able to see where the transferred bitcoin came from.”

Global ETF provider WisdomTree also foot To make an S-1 amendment to the spot Bitcoin ETF, WisdomTree Bitcoin ETF, on December 18, retaining the in-kind creation and redemption option.

“Authorized participants, acting on the authority of a registered stockholder, may deliver Baskets in exchange for the corresponding amount of Bitcoin or cash,” the registration statement said, adding that access points may be able to create or redeem a Basket through an option type.

Financial attorney Scott Johnson predicted in mid-December that ETF applicants would eventually have to bend to using a cash creation and redemption model for their ETFs. Previously, Invesco and Galaxy ETF applicants also updated their S-1 registration statements using the “cash only” form.

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